Betsy DeVos loses student loan lawsuit brought by 19 states

By Bloomberg

Sep 13, 2018 | 9:50 AM

Education Secretary Betsy DeVos was sued by plaintiffs including the states of California and New York. (Jose Luis Magana / Associated Press)

Education Secretary Betsy DeVos lost a lawsuit brought by 19 states and the District of Columbia, accusing her department of wrongly delaying implementation of Obama-era regulations meant to protect student loan borrowers from predatory practices.

A Washington federal court judge ruled Wednesday that the department’s postponement of the so-called Borrower Defense rule was procedurally improper. The case, Bauer vs. DeVos, includes California among the plaintiffs.

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The Obama administration created the rule in the wake of revelations that some for-profit colleges enticed students with promises of an education and diplomas that would enable them to get jobs in their chosen fields. In reality, many of those certifications weren’t recognized by prospective employers, leaving graduates saddled with student loans they couldn’t repay.

The Borrower Defense regulations changed the rules for forgiving student loans in cases of school misconduct and required "financially risky institutions" to be prepared to cover government losses in those instances, according to U.S. District Judge Randolph Moss’ 57-page ruling.

By postponing the effective date of those regulations, the Education Department deprived plaintiffs "of several concrete benefits that they would have otherwise accrued," Moss wrote. "The relief they seek in this action — immediate implementation of the Borrower Defense regulations — would restore those benefits."

Writing that he didn’t want to delay matters further, Moss — a 2014 appointee of then-President Obama — said he will hold a hearing Friday to consider remedies.

The Department of Education didn’t respond to a request for comment.

The regulations were to take effect July 1, 2017, but the government delayed implementation in June of that year after the California Assn. of Private Postsecondary Schools sued, challenging the validity of the rule.

DeVos said then that while her "first priority" was to protect students, the Obama administration’s rule-making effort had "missed an opportunity to get it right." In October, her department provisionally reset the effective date to July 1, 2018, and then in February postponed it again, now to July 1, 2019.

Moss ruled that all those delays were invalid. He rejected a succession of arguments from government lawyers, calling some "unpersuasive" and others "unhelpful." His decision also covered claims by two student borrowers in a lawsuit filed on their behalf by the consumer advocacy group Public Citizen. The states’ suit was consolidated with it.

9:50 a.m.: This article was updated with additional details about the Borrower Defense regulations, the postponements and the lawsuit.